Life returned to insurance – Newspaper Kommersant No. 213 (7414) dated 11/17/2022

Pessimistic estimates regarding the segment of investment life insurance (LIS) were not fully justified. In the third quarter, insurance companies increased their sales of these policies sharply, while the fast-growing endowment life insurance (LIS) segment slowed down growth. Market participants attribute the situation to a decrease in deposit rates, which customers are guided by when buying ILI. Experts believe that the recovery of the segment will continue, however, they are reminded of the high risks of such instruments.

The interest of clients in the insurance policies of the NSZH decreased significantly in the third quarter, follows from the data of the All-Russian Union of Insurers. Collections amounted to 62.1 billion rubles, which was 21% lower than in the second quarter. Compared to last year, growth was almost 45%, but in the second quarter it exceeded 120%. At the same time, sales of ILI policies in the third quarter increased by 63% compared to the second quarter, to RUB 34.7 billion. Year-on-year sales were down 40%, but in the second quarter, the decline exceeded 60%.

Previously, market participants expected the dynamics of the beginning of the year to continue in the second half of the year (see “Kommersant” dated August 11). According to Group B1 partner Gennady Shinin, the observed dynamics is most likely associated with the appearance on the market of products based on new financial instruments used in ILI products, since after the introduction of restrictions a number of previously used instruments became unavailable to insurers, it took time to develop new mechanisms and search available tools.

Stepan Derevyansky, Deputy General Director of Soyuz Insurance Brokers, believes that many consider ILI as an alternative to deposits.

In the first and second quarters, the rates on them were very attractive, and customers used this tool. However, in the third quarter, short high-yield deposits closed, and clients began to look for new investment opportunities, he notes. Taking into account ILI investments in more risky (and potentially more profitable) instruments, there has also been a partial transition of investors to these instruments, market participants note.

At the same time, it seems unrealistic now to achieve the former diversity in the basic instruments that the ILI was guided by until March of this year. Alla Borisova, Deputy Director of the Financial Institutions Ratings Group of ACRA, notes that Russian insurers can find financial partners for ILI within Russia, but the previous variety of financial conditions for these instruments will be unattainable. As Sovcombank Life points out, the choice of issuers is limited today, it takes time to accept the situation and adapt to work in it.

In the fourth quarter, insurers expect the July-September trends to continue.

According to Anna Avakimyan, chief analyst at RegBlok, the fourth quarter for ILI will resemble the third, but with less recovery enthusiasm. This segment will recover, since deposits are no longer attractive to the population, Mr. Derevyansky explains. At the same time, Olga Basova, senior director for ratings of insurance and investment companies at Expert RA, believes that ILI will probably not be able to reach the values ​​of the previous year (according to the results of nine months, the drawdown was more than 45%.— “b”).

Experts specify that ILI is a risky type of life insurance. “The risks for consumers here are that ILI is not a substitute for a deposit, but this financial product is often sold precisely as a deposit,” Dmitry Yanin, chairman of the board of the international Confederation of Consumer Societies, draws attention. However, in relation to him, “there is no insurance system that guarantees depositors in the event of a bank failure the return of their savings”, “there is no way to withdraw all the money before the deadline specified in the contract,” the expert notes.

Tatyana Nikitina, senior director of ratings for financial companies at the NRA, adds that policyholders continue to complain about problems with ILI, despite the fact that in 2022 sanctions risks were added to the usual risks, due to which clients cannot receive investment income on “frozen” foreign assets.

Julia Poslavskaya